While most of the Dow Jones indexes use objective,
rules-based processes for the selection of components, the Dow Jones Averages
are an exception. Their components are selected at the discretion of the
editors of The Wall Street Journal. There are no pre-determined
criteria except that components should be established U.S. companies that
are leaders in their industries; however, companies considered for inclusion
in the averages are subjected to rigorous analysis before a decision is
made.

For the sake of continuity, composition changes
are rare, and generally occur only after corporate acquisitions or other
dramatic shifts in a components core business. When such an event necessitates
that one component be replaced, the entire index is reviewed. As a result,
multiple component changes are often implemented simultaneously.

Unlike the Dow Jones Transportation Average
and Dow Jones Utility Average, which include only transportation and utilities
stocks, the Dow Jones Industrial Average is not limited to traditionally
defined industrial stocks. Instead, the index serves as a measure of the
entire U.S. market, covering such diverse industries as financial services,
technology, retail, entertainment and consumer goods.

Calculation

The Dow Jones Averages are unique in that they are price weighted rather than market capitalization weighted. Their component weightings are therefore affected only by changes in the stocks' prices, in contrast with other indexes' weightings that are affected by both price changes and changes in the number of shares outstanding.

The indexes are just what their names imply: basic, easy-to-calculate averages. To calculate one of the averages, simply add up the prices of its components on their primary exchanges and divide the sum by the divisor.

Over the years, adjustments have been made to the divisors to ensure the continuity of the averages after corporate actions such as spin-offs and stock splits. As a result the divisors are no longer equal to the number of components in each of the averages, as would be expected. For example, after 100 years of adjustments, the current divisor for the Dow Jones Industrial Average, available here, is less than one.